The $39 million man

For evidence that nonprofit work has become exceedingly lucrative, look no further than former Lifespan CEO George Vecchione. His compensation package hit $7.88 million in 2011, following a $9.5 million...

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Posted Nov. 17, 2013 @ 12:01 am

For evidence that nonprofit work has become exceedingly lucrative, look no further than former Lifespan CEO George Vecchione. His compensation package hit $7.88 million in 2011, following a $9.5 million gusher in 2008, according to a startling investigation by Target 12. Between September 1998 and his retirement in December 2012, Mr. Vecchione raked in $39.2 million from Lifespan. Some professional sports stars might make more, but they are backed by billions of dollars in advertising revenue and ticket sales.

This might not be so striking were it not accompanied by lean times for many Lifespan employees. Citing budget restraints, the company recently cut 122 positions (about two-thirds of those jobs were vacant), including 15 doctors, at its flagship, Rhode Island Hospital. Meanwhile, Lifespan has stopped matching contributions to nurses’ 403(b) retirement accounts, according to Helene Macedo, president of the hospital’s United Nurses & Allied Professionals union chapter.

It is hard to imagine that $39.2 million figure is improving morale among the rank and file as their bosses tell them the hospital is going through hard times and everyone will have to do more with less.

Hospital officials have their arguments for all this, of course. Essentially, they say, Mr. Vecchione was worth it, because he did things that earned much more than his salary. The number of employees at Lifespan grew; research funding ballooned; the company made a huge investment in new construction and technology to be positioned for the future.

They note, further, that Mr. Vecchione’s compensation was not out of line with that of similar hospital executives, and that it was established by a compensation committee that made recommendations to the board of directors.

Maybe, but such largess does have its drawbacks. It hurts morale and raises questions about whether the nonprofit (protected from many taxes) is spending its money to serve the public, rather than enrich well-connected fat cats. It invites politicians to try to pander to the public by proposing limits on hospital executives’ compensation. (Executive compensation is a subject, like many others, that politicians know little about.) It makes it harder for Lifespan to argue that Rhode Island is putting the state’s hospitals in danger by failing to kick in more taxpayer dollars to help compensate for skyrocketing “free” care.

Lifespan is not saying how much it is giving to Mr. Vecchione’s successor, Timothy Babineau. That will have to wait for publication of the nonprofit’s filing with the Internal Revenue Service.

Without a question, the health care provided by Lifespan facilities is vitally important to Rhode Island. But Lifespan, as a nonprofit in a state with a struggling economy, might want to consider whether it is truly in its interest to grant such immense riches to its executives.